California’s cannabis licensing system has a lot of critics. People trying to operate in California’s licensed commercial cannabis industry have complained about high taxes, burdensome regulations, a thriving illicit market, substantial delays, an artificially limited number of licenses, and rampant local government corruption. In many ways, California’s licensing rollout can be used as an educational example of how not to establish an efficient and functioning regulated industry.
How can California right the ship and get the industry back on track? We could stand to learn from Missouri, which currently allows medical cannabis, and is seeking to add non-medical, adult-use cannabis licensing. Missouri’s medical cannabis licensing is limited and subject to stringent regulation. In expanding to adult-use licensing, however, a recent bill would greatly simplify the process, so that cannabis is treated essentially the same as other commercial agriculture, with modest regulations and relatively low taxes.
Missouri Republican state Representative Shamed Dogan recently filed the constitutional amendment to legalize cannabis for adult use in the state (https://house.mo.gov/billtracking/bills211/hlrbillspdf/1240H.01I.pdf), which has been co-sponsored by six other Republican and Democratic representatives (https://house.mo.gov/Bill.aspx?bill=HJR30&year=2021&code=R). If approved, it would come to a vote of the people in 2022. The bill, called the Smarter and Safer Missouri Act, would allow regular people to participate in the licensing, not just moneyed corporate interests. In turn, this would allow the market, not politicians, to sort out the winners and losers. It is much simpler than California’s Byzantine cannabis licensing system.
The Missouri law would remove cannabis from the state’s controlled substances list, and impose a 12 percent tax on adult-use cannabis, one of the lowest rates in the country. Notably, it imposes no limits on the number of cannabis dispensaries allowed to operate. It also expunges the records of people who have been convicted of non-violent cannabis offenses and orders anyone incarcerated for nonviolent cannabis offenses to be released from custody.
The stated goals of the Smarter and Safer Act are “the efficient use of law enforcement resources, enhancing revenue for public purposes, and individual freedom,” where “[l]egitimate, taxpaying business people, not criminal actors, conduct sales of marijuana.” The idea is to largely eliminate the illicit market, by making it easy and cheap enough for any interested, responsible parties to set up a legitimate business. This is a stark contrast to California, where licensing can be so cumbersome, time-consuming, and expensive that only those with deep pockets can comply, and a giant illicit market continues to operate, making it difficult for licensed operators to compete. California jurisdictions’ limitations on the number of licensed dispensaries allowed to operate also encourages corruption, as potential operators are pressured to make under-the-table payments to receive one of the few available licenses.
In America, state governments have a great deal of flexibility to set their own public policies, resulting in 50 different “laboratories of democracy.” Although cannabis remains illegal under federal law, most states have passed some type of cannabis legalization, with a wide variety of approaches. After observing how California’s model works in practice, we can see there is plenty of room for improvement. California’s citizens would be well-served if the state borrowed an idea from Missouri, and overhauled its licensing system to be more simple and less expensive to navigate.
Author: Raza Lawrence, ESQ. (Dark Matters)